Insurance: What Do You Really Need? (Part 2)

Last week, I started us on a journey down the path to learn what types of insurance are out there and whether or not they are something you should consider. Of course there are plenty of opinions out there and so I hope my post, plus the comments that got added, helped you if you were trying to figure all the insurance mess out for yourself. Today, I’m continuing with some additional insurance types and we’ll see where we land at the end. Let’s dive in.

Homeowner’s / Renter’s Insurance

What happens if while you’re on vacation, the water line to your ice maker bursts and floods your kitchen and entire basement? We had some friends that had this happen. What happens if you decide to grill those burgers a little too close to the house and catch the place on fire? What happens when a thunderstorm blows the big tree in your front yard into your bedroom via the newly-created hole in your roof? What happens when a burglar decides your stuff is now his stuff? You get my point. Whether you own or rent – have insurance. If you own, get replacement cost insurance. If you rent, be sure your renter’s insurance covers all the stuff you would miss if it were to disappear.

Disability / Long-Term Care Insurance

People get hurt all the time. AFLAC makes millions with their little duck telling people they need money if they can’t work and he’s right – if you can’t work, how do the bills get paid? Many companies offer short-term disability as an employee benefit, but after that, then what? Your emergency fund (you have one of those, right?) will cover you for a while, but if you don’t have long-term disability insurance, you are risking a lot. Some employers offer both short- and long-term disability to employees. If not to you, check into this. It usually isn’t too expensive and will help you sleep at night. Once you reach about age 60, you also NEED long-term care insurance. If you make it to 60, chances are you will live to be old enough to need some assistance. Whether it be a full-blown nursing home or a simple assistant to periodically check in on you, long-term care is EXPENSIVE and it will drain your bank account fast if you don’t have this type of coverage. Until you reach 60, this isn’t a big deal. But once you’ve celebrated the big 6-0, get this.

Pet Insurance

Hate me if you will, but I think pet insurance is ridiculous. Pets will get sick and sometimes the care costs a lot. But based on what it costs, pet insurance is a ridiculous, emotion-based coverage that isn’t worth it. Before you call me a heartless and horrible human being who hates all animals, let me tell/remind you that I’m a parent to a “furry daughter” (Dottie – our dog), whom I love very much and consider to be one of my children. We’ve also had to spend some money on her medical needs, even to the point of seeing a specialist for her back issues (she’s a Daschund).

Our Dottie

Umbrella Policies

There may be a point at which you have some significant assets. If you’re someone who may be the target of getting sued because you’re a “bigger fish” than the normal guy who might get in a car accident or have someone hurt on your property, you should consider an umbrella policy. How does it work? If your auto policy covers $250,000 worth of liability, an umbrella policy would pick up where that policy leaves off to protect you further. For the average person, $250,000 is plenty, but what if you are sued for $1,000,000 and lose!? In our litigious society (in other words, we live in a world that chases “easy money”), an umbrella policy basically adds some extra cushion to any of your other policies. I don’t have one of these policies but when we have some more assets that insurance may not cover, I plan on getting one.

Shew…between last week’s post and this one, that was one big list! I could keep going with lots of other insurance types, but I think I’ve hit all the big ones. Feel free to add your thoughts on any you like in the comments below and I’ll add my thoughts on those as well. If you’re trying to navigate the mess of insurance options out there, I hope this has given you some food for thought.

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About Barry

Barry is the husband half of the Humorous Homemaking team. He speaks and writes about personal finance issues, helping people get out of debt, live on a budget and make the most of every cent that comes into their hands. He is the author of From Debtor to Better: The Details of Debt and How to Get Out! and regularly speaks at conferences and other events.

Comment Policy: I love reading your thoughts and input on what you read here. I'm sure we'll disagree sometimes and that's okay! In those cases, do what's right for you and yours. As with any form of communication, only post comments that move the discussion in a positive direction.

Comments

Hey Katrina, I discuss this a little in my first post on insurance (http://www.stacymakescents.com/insurance-part-1) but it really boils down to this: medical insurance is not a catch-all to pay for every possible expense that will arise. Instead, it is to make sure a medical expense doesn’t sink you financially. So…it all depends on what your medical needs are vs. your budget vs. your savings to cover unexpected medical expenses. I wish I could be specific but it boils down to that.

A little late to the party, but I thought it was important to mention that if you live on the west coast, you should have earthquake insurance. It’s about $25 a month, and you’ll appreciate it when your foundation splits clean down the middle or the hill you live on becomes a landslide in the next Big One.

Insurance can be so frustrating! I have a finance question for Barry – we have put off investing our retirement income for too long. My husband’s in school and I just started working again, so we don’t have much in there right now, anyway.
The reason I’ve put off finding a place to invest our retirement funds is that I want to make sure my money is not going to go toward buying stock in companies I don’t believe in. We try to support responsible businesses whenever possible, and I want to use this same principle in investing. I’d LOVE a post about socially responsible investing (SRI) – whether it’s worth it, what are the risks, pros, cons, how to go about it, etc.

Hey Barry,
Our house will be paid off in less than a year and I was wondering should we get an umbrella policy then to protect our home or still just depend on homeowners in case someone gets injured on our property or one of the horses gets out. Also, my husband will be turning 60 in a couple of years. Any suggestions on companies that we could check into for long term care insurance. Thanks. Happy Birthday!!

If you have replacement cost homeowner’s insurance then you should be covered on the house and while you’ll have liability limits with any policy, I suspect you’re not at any higher risk of being sued than anyone else. For those reasons, you’re probably safe. As far as the horses, I have no clue – I really don’t know how that would work (sorry!). Because Dave Ramsey endorses them and I’ve used them for life insurance, I’d recommend you check out Zander Insurance for the Long-term Care coverage (http://www.zanderins.com/other/longtermcare.aspx). Thanks for the birthday wishes!

I know first hand the benefits of having a good car insurance policy. While riding my bicycle I was struck by an uninsured motorist. MY car insurance paid for all my medical bills because I have uninsured & underinsured motorist on my policy.

I agree with you on the pet insurance. One suggestion I’ve heard is to find out how much pet insurance would cost for your animal, then instead of signing up for a policy open a separate bank account and have that amount transferred there every month. That way, in a pet emergency you’ll have some funds available to get your pet the help it needs without having to worry about money. And if its never needed you could put that money into your savings.

If you’re prone to having higher pet costs and can make it work in your budget, this is a great idea. We’ve always either planned for pet expenses as a part of our normal budget or for unexpected larger expenses it may be an emergency fund issue.

We got an umbrella policy several years ago because, while doing a re-assessment with our agent, we found out we could get more coverage for less money by having one. Since we have both cars and our home with one company (disability and life are somewhere else) our agent showed us how we could lower our monthly premium, but increase the amount of coverage we had by going to an umbrella policy. We’re hardly “big fish”, but that sounded like a good deal to us so we went with it 🙂 We’re still fully covered with our cars and home.

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